Lawyers/Real estate agents

[a.bentonab]

My wife and I are about to rent a property from a gentleman here in town. I have one question that a lawyer or real estate agent may be able to answer:

I will be signing a 1 year lease. The owner has already stated he tried to sell the house but would take a great loss at this time which is why he is renting it. Is he able to sell the house while we are living in it under a 1 year lease? and if he is (which I think he is) are we immediately kicked out? Do we get a notice? (I think this ones right) or is the new owner obligated to follow the terms of our 1 year lease?

I would appreciate your opinions but I'll need written information from a reputable source to take to the landlord to have the contract drafted. + rep for anyone citing Indiana Code or other reputable source. Thanks!

 

[woowoo2]

or is the new owner obligated to follow the terms of our 1 year lease?

This....

 

[snorko]

Most often when a rental property is listed/sold, it is done so with the tenant's right of occupancy clearly stated.

If you have a one year lease and follow that lease, you should not be able to be booted during the lease term. Read the lease carefully. It would be very easy to have a clause stating something to the effect that "if the leased premises are sold during the initial term of this lease, the contract shall terminate and the tenants will have 30 days to vacate."

 

[88GT]

My wife and I are about to rent a property from a gentleman here in town. I have one question that a lawyer or real estate agent may be able to answer:

I will be signing a 1 year lease. The owner has already stated he tried to sell the house but would take a great loss at this time which is why he is renting it. Is he able to sell the house while we are living in it under a 1 year lease? and if he is (which I think he is) are we immediately kicked out? Do we get a notice? (I think this ones right) or is the new owner obligated to follow the terms of our 1 year lease?

I would appreciate your opinions but I'll need written information from a reputable source to take to the landlord to have the contract drafted. + rep for anyone citing Indiana Code or other reputable source. Thanks!

IANAL, but I am a licensed broker and have been a landlord/property manager for 10+ years.

The new owner is not legally obligated to honor the full term of the lease unless the purchase agreement stipulates such. The lease agreement is made with the current owner, not the new owner.

IC is silent about minimum time required for notice. But a best-practice standard is usually a 30-day minimum notice for non-emergency or similar non-lease circumstances. However, an occupancy that takes place outside of a recognized or implicit landlord-tenant agreement requires no notice as well. Though a new owner would have to be completely ignorant of the tenants for this to fly.

Still, even with the notice to vacate from the new owner, it takes a court order for him to make good on it with force. Judicial evictions are the only means of being sure of getting someone out in Indiana.

Even language in the lease saying that a new owner has to honor the lease is worthless since the new owner was not a party to the agreement and did not agree to honor the lease. It would have to be in the purchase agreement.

Relevant IC:

IC 32-31-1-10
Conveyance by landlord
Sec. 10. A conveyance by a landlord of real estate or of any interest in the real estate is valid without the attornment of the tenant. If the tenant pays rent to the landlord before the tenant receives notice of the conveyance, the rent paid to the landlord is good against the grantee.
As added by P.L.2-2002, SEC.16

Not really relevant since it applies more to commercial or land rents in practice. But I included it since it's the only portion of IC I could find specifically mentioning conveyance of the property.

IC 32-31-1-8
Notice to quit; when not necessary
Sec. 8. Notice is not required to terminate a lease in the following situations:
(1) The landlord agrees to rent the premises to the tenant for a specified period of time.
(2) The time for the determination of the tenancy is specified in the contract.
(3) A tenant at will commits waste.
(4) The tenant is a tenant at sufferance.
(5) The express terms of the contract require the tenant to pay the rent in advance, and the tenant refuses or neglects to pay the rent in advance.
(6) The landlord-tenant relationship does not exist.
As added by P.L.2-2002, SEC.16.

So to summarize: the new owner is not obligated to honor the lease and is not obligated under IC to give you any time at all. But if it gets to court, the judge may consider the reasonableness of the demand to vacate in his/her ruling. If the new owner required immediate removal of tenant/possessions, judge may find that this is unreasonable, and while the new owner will likely be granted the possession, the judge will probably order the day to vacate to be some point in the future, about 30 days in the future. So it's generally just easier for most landlords to provide the 30-day notice anyway.

 

[88GT]

Most often when a rental property is listed/sold, it is done so with the tenant's right of occupancy clearly stated.

If you have a one year lease and follow that lease, you should not be able to be booted during the lease term. Read the lease carefully. It would be very easy to have a clause stating something to the effect that "if the leased premises are sold during the initial term of this lease, the contract shall terminate and the tenants will have 30 days to vacate."

"Tenants' rights" is essentially a disclosure notice to potential buyers. It's constructive notice that, yes, in fact, the premises are occupied by tenants and the buyer should make his choices accordingly. Under IC however, (at least as far as the section governing landlord/tenant law), there are no tenants' rights statutes involving survivorship of the lease and/or protections/rights of the tenant when the property is conveyed to a new owner.

 

[a.bentonab]

Many thanks to those who replied.

After doing some additional research, some sources online are saying that the federal Protecting Tenants at Forclosure Act, PTFA, passed in 2009 allows tenants to stay in their homes for the duration of the lease if the new owner does not plan to use the home as his primary residence. Even if the new owner does use the house as primary residence, they must give 90 days notice.

Any comment on the PTFA?

The landlord is agreeable to adding a clause to the lease that under a new owner we could finish the lease. Honestly this is all just dotting I's and crossing T's at this point because in this market I doubt he'll get any kind of decent offer. I know someone else said that a clause like this wouldn't hold up in court. Would any specific language change that? Maybe something to the effect of "tenant can finish his lease under a new owner AND new owner is to be notified of this before any sale?"

 

[88GT]

Many thanks to those who replied.

After doing some additional research, some sources online are saying that the federal Protecting Tenants at Forclosure Act, PTFA, passed in 2009 allows tenants to stay in their homes for the duration of the lease if the new owner does not plan to use the home as his primary residence. Even if the new owner does use the house as primary residence, they must give 90 days notice.

Any comment on the PTFA?

Not applicable. The Act only applies to tenants who occupy homes that have already been foreclosed and are now owned by the lien-holders.

The landlord is agreeable to adding a clause to the lease that under a new owner we could finish the lease. Honestly this is all just dotting I's and crossing T's at this point because in this market I doubt he'll get any kind of decent offer. I know someone else said that a clause like this wouldn't hold up in court. Would any specific language change that? Maybe something to the effect of "tenant can finish his lease under a new owner AND new owner is to be notified of this before any sale?"

No lease agreement language can obligate a new owner to the lease terms. Only the purchase terms of the sale of the property can do that.

 

[ArmedProgrammer]

88GT - That's interesting - I had always understood that the lease followed the property.... Hence the reason for getting estoppel info when buying an occupied property. If the new owner's not responsible for the lease - then what's the point of that?

Hmmm... I would never question your knowledge on this - but this is the first time I've ever seen you state something contrary to what I'd read/studied. But I'm not a lawyer nor and agent - just a long time landlord that studies stuff...

Never really affects me, since I favor month to month leases anyway.

I'll have to look into this.

P.S. To a tenant - If a new owner comes in an wants you out, they can find a way... I just was under the impression that when a new owner bought the property, they bought any existing leases along with it and had to honor the terms.

 

[hoosierdoc]

Every time I read this thread Subject I can't help but think it's like a jeopardy answer and the question is "what two professions should be loaded onto a rocket and sent to Mars?" I jest...

 

[88GT]

88GT - That's interesting - I had always understood that the lease followed the property.... Hence the reason for getting estoppel info when buying an occupied property. If the new owner's not responsible for the lease - then what's the point of that?

At the risk of answering a question with a question, how could the new owner be obligated to the lease if he did not agree to the terms when it was created and executed? I'm not sure how estoppel obligates the new owner to the old owner's lease. I'm just going by IC and my experiences as both a landlord and a broker/agent.

Of course, I am not denying the possibility that if adjudicated, a judge wouldn't require the new owner to honor the lease. IC is silent on a lot of things (thankfully), so that makes for a lot of gray areas to be considered on a case by case basis. A new owner can certainly paint himself into a corner and obligate himself in the eyes of the judge if it reaches that point. But as current contract law and IC stands, the lease does not survive the transfer.

Hmmm... I would never question your knowledge on this - but this is the first time I've ever seen you state something contrary to what I'd read/studied. But I'm not a lawyer nor and agent - just a long time landlord that studies stuff...

I could be wrong, but then just about every other agent and landlord in the state is doing it wrong too. Do you have any links to these sources? If I'm wrong, I certainly want to remedy that.

 

[ArmedProgrammer]

88GT -
After a quick glance at the IC , I think you may be right... My information was based mostly on a landlord site that was pretty reputable - kind of like INGO on gun laws. So , assuming that you are right - if Landlord 1 sells to Landlord 2 - the tenant can violate the lease with no recourse, right? Since the lease is not valid anymore? No pets in the prior lease - in comes the pit bull...